Cowboys and Saloons. Chickens and Eggs. Customers or Employees. Which Came First?

Which came first, cowboys or saloons? Chickens or eggs? While these important questions may never resolved, the role of employees in leveraging customer loyalty behavior is far simpler to understand. It's impossible to have customer loyalty and advocacy without employees both understanding their role as CRM stakeholders and living the role as value delivery agents and supplier ambassadors.

Satisfaction is almost irrelevant
Employees are at least as important as other aspects of customer management in optimizing benefits for customers. They are key stakeholders in value delivery and brand/supplier success, and they frequently represent the difference between positive and negative experiences and whether customers stay or go.

The extent of their role and impact needs to be better understood, but employee satisfaction isn't the best way to do it. Why not? Industrial psychologists and organizational behaviorists have been studying employee satisfaction for more than 30 years. But they have been unable to confirm a relationship between employee satisfaction and business performance.

But researchers—including James Oakley of Purdue University, Northwestern University's Forum for People Performance Measurement and Management and relationship experts Dwayne D. Gremler of Bowling Green State University and Kevin P. Gwinner of Kansas State University—have found that employee behavior and advocacy—regardless of the employee's level of satisfaction—have a direct and profound relationship to the behavior of customers, and also to corporate sales and profitability.

Employees are capable of directly contributing to both customer disappointment and customer delight. It is essential that companies have a research and analysis method that links staff performance engagement directly to customer behavior, so they can hire, train, recognize and reward employees for how they contribute to customer value.

The Safeway experience
Safeway is the second largest grocery chain in the United States. In its drive to sustain a reputation for friendly service, the company endeavored to institutionalize friendliness. About a decade ago, the company introduced Superior Service, requiring its 150,000 employees to anticipate customer needs, make selling suggestions, greet and thank customers by name at checkout and offer to carry groceries to customers' vehicles. Employees were told they had to smile and make eye contact with Safeway customers.

Safeway rigorously enforced the program through a mystery shopper system. Employees perceived as less than satisfactory were given remedial training or disciplinary letters. Poor behavior could lead to termination.

Safeway executives, believing that higher customer satisfaction would lead to increased loyalty and stronger financial performance, saw those objectives realized, at least for a couple of years. However, the failure of Superior Service to a) consider the concerns of employees and b) create real value for customers had significant negative consequences. For instance, the forced smiles made many Safeway shoppers uncomfortable, leading to a significant increase in sexual harassment claims. Safeway staff morale dramatically declined, and the employees' union even filed charges with the National Labor Relations Board, claiming that the company had created a "hostile work environment" by forcing them to smile.

So, while the Superior Service plan may have increased customer satisfaction, it had a negative impact on the culture and employee performance. Safeway paid a price for superficial, tactical value delivery and non-inclusive program development and execution.

The employee ambassador
Companies must weigh the role and impact of employees, especially in creating benefit for customers. When examining the leverage employees can exert on customer states of mind, a few companies have learned that employees loyal to the company are also loyal to its brands—and are more likely to act as ambassadors in creating customer commitment and advocacy. Two U.S. marketing professors, Eugene Fram, of Rochester Institute of Technology and Michael McCarthy of Miami University, Ohio, found that companies with employees highly loyal to their brands are more positive about their employment with the company, itself; are more likely to believe the company is customer-focused; and are more likely to have pride in the company and believe that it is well managed (See From Employee to Brand Champion in the January-February 2003 issue of Marketing Management.) The figure below illustrates their findings.

Figure 1

The dual message here is that companies should focus attention both on creating brand "champions" and advocates among customers and on building the capabilities and careers of employees.

How customers think and feel as a result of their touch and transactional experiences with suppliers links directly to customer mindset and behavior. These are the "moments of truth" that drive what customers do.

Today customers have more ways to engage with suppliers of goods and services than at any time in the past. So companies have more ways to succeed in creating a relationship—and also more ways to fail. Whether the "touch" is by paper, by a human being or by electronic means, organizations must offer consistent, seamless and positive experiences for customers. Service, especially, is often a major differentiator and lever for either customer advocacy or, if done grudgingly or poorly, customer defection.

Also important is gathering customer feedback at key touch-points so the company can know, in as real time as possible, what is working. Finally, because touch-points are so critical in managing the overall experience—and frequently the key source of customer delight or pain—there must be a C-suite executive accountable and responsible for executing all of the touch-point elements. Such an individual—let's call this person a chief customer officer—is missing from the organization chart of many companies.

My research into the impact of delightful and disappointing experiences has shown that disappointing experiences will lead directly to indifference in the relationship and engagement with a supplier. As customers become increasingly positive with their supplier experiences, there is a direct correlation with advocacy levels. In fact, the rate of correlation between type of experience and degree of customer advocacy is almost 100 percent.

Increasingly, we are beginning to understand, and even predict, the effect on customer advocacy of employees. This is a "holy grail" for many organizations, as they strive to leverage human capital to best effect. As Fortune columnist Thomas Stewart has said, "Human beings want to pledge allegiance to something. The desire to belong is a foundation value, underlying all others" (Fortune, July 8, 1996).

When that "something" is the optimization of customer loyalty behavior, coupled with the highest levels of employee participation and investment in reaching that goal, everybody wins.